9 ms·

Articles misses that this is in response to SF's gross receipts tax. Payment processing is an ultra low margin business, no way they can compete while paying ~1

by cjlars 7y ago

Articles misses that this is in response to SF's gross receipts tax. Payment processing is an ultra low margin business, no way they can compete while paying ~1% of revenues to the city.

MuffinFlavored 7y ago
Payment processing rates in China are ____ Payment processing rates in USA are ___ Can somebody help me double check something? I don’t know the answers to those questions I feel like I read WeChat processes payments at 0.1% while Stripe/PayPal are still around 2%
- lukeschlather 7y ago
  I have a credit card that gives me 1.5% cash back on every transaction. I'm reading that Visa typically charges 2.3% to merchants, and Stripe charges 2.9%, ignoring per-transaction fees. So Stripe itself probably gets around 0.6% of each transaction, and at least on average 1% of each transaction goes to cardholder bonuses, and the card issuer gets around 1.3%. Of course both Stripe and the issuer have some fraud prevention built-in, I don't know how much that amounts to (and how much more effective China is at combating fraud, though it's possible WeChat simply doesn't accept as much liability as American payment processors do.)
  - aeternum 7y ago
    Card not present transactions (the type primarily used by Stripe) are charged at a significantly higher rate due to the higher likelihood of fraud. To use square as an example, card present is 2.6% whereas card not present is 3.5%.
  - AdieuToLogic 7y ago
    Your conflating fees charged to Merchants (by processors) and rewards offered to Card Holders (by issuers). While often the same bank performs, or is a partial owner involved in, both processing and issuing, the percentages you quote are largely disjoint. > I'm reading that Visa typically charges 2.3% to merchants ... The Discount Rate[0] a Merchant pays varies significantly based on the line-of-business, charge-backs, processing contract, and a bunch of other things. > ... at least on average 1% of each transaction goes to cardholder bonuses ... Again, issuer costs have no bearing on Merchant fees nor the profitability of processors. 0 - https://www.creditcards.com/credit-card-news/glossary/term-discount-rate.php https://www.creditcards.com/credit-card-news/glossary/term-d...
    - nitrogen 7y ago
      Again, issuer costs have no bearing on Merchant fees nor the profitability of processors. If this is true, then where does the cash back come from if not as a cut of the merchant fees?
      - AdieuToLogic 7y ago
        > > Again, issuer costs have no bearing on Merchant fees nor the profitability of processors. > If this is true, then where does the cash back come from if not as a cut of the merchant fees? Interest rates + membership fees charged by issuers to Card Holders.
        rstupek 7y ago
        I don't think that is correct. Merchants are charged different rates based on the cash back rates of a given card. Merchants have to eat most of that cash back being given to the card holders.
    - ceejayoz 7y ago
      Interchange fees are higher on premium (rewards) cards. The merchant may contractually pay a fixed percentage that accounts for the expected mix of cards, but those rewards absolutely come from merchant fees.
  - rwmurrayVT 7y ago
    There are entire organized crime rings and many, many individuals that specialize in merchant account fraud. In the early 2010's people were creating stripe accounts and processing up to $100,000 fraudulently. I'm not sure who ate that, but it surely had an impact on their bottom line. I had screenshots from Alphabay of over $5,000,000 in fraudulent charges on merchant accounts. If Stripe only makes 1% of transaction cost and has to eat the fraud then they'd have to charge $500,000,000 to just make up what was posted in a single "mastermind group". That is crazy...
  - MuffinFlavored 7y ago
    From a quick Google, I think the difference is that WeChat is bank-to-bank, therefore the rates are 0.1%
  - dehrmann 7y ago
    > I have a credit card that gives me 1.5% cash back on every transaction Some of this is paid for by people carrying balances. The bet is that cash back will attract enough people to get and use the card that, in aggregate, interest will make up for cash back.
ergocoder 7y ago
Also, the tax oddly targets Stripe and Square. People don't talk about this very much. But it seems extremely unfair that Stripe/Square pay way more tax than Saleforce in terms of ratio to their revenues. (I don't recall the numbers. Anyone?) Jack Dorsey tried to raise this point multiple times. But people just kept screaming that he didn't care about homeless :S
- natalyarostova 7y ago
  Neither does San Francisco. They just pretend they do.
- henrikschroder 7y ago
  > But people just kept screaming that he didn't care about homeless JFC, it's not because of a lack of money that SF has a problem with homeless people, and it's not that more money would make the problem magically go away.
  - taurath 7y ago
    I’ll be honest though. I’m not sure new housing can actually work to lower prices, with all the incentives for real estate locked towards ever increasing prices. Maybe over decades, while losing the entire feel of the city?
    - paulie_a 7y ago
      They'll be plenty house as talented people continue to flee. Meanwhile juniors flock. If a CEO of a sizable Corp can't get by without a roommate something is wrong. I certainly wouldn't work there for less than a half plus million a year. Shit weather and fog I'd rather work in North Dakota.
      - dmode 7y ago
        This is surely exaggerated right ? I know CEOs of large startups who live in mansions in Woodside, Berkeley, Mill Valley etc
deleted 7y ago
[deleted]
deleted 7y ago
[deleted]
dickeytk 7y ago
What are you talking about? It specifically talks about it and even provides 2 quotes with contradicting points of view: “Alex Tourk, spokesman for sf.citi, a tech business group, said San Francisco needs to consider changes to its business taxes. The city is currently reviewing the tax system, which brings in a total of $1 billion annually. But those taxes could climb higher under the revised system. “Unfortunately, Stripe choosing to leave town is not an anomaly,” he said. “The membership of sf.citi would prefer a more holistic strategy per the mayor’s suggestion that we work together as a collective business community to fix the gross receipts tax once and for all and establish a fair and equitable tax system that we can all rely on.” Chris Thornberg, founder of Beacon Economics, said businesses leaving San Francisco has more to do with real estate costs and high wages than taxes. “Taxes don’t have a lot of impact on business decisions. It’s something that has been exaggerated for years,” Thornberg said. Stripe is staying in the Bay Area, so its departure isn’t a blow to the region, he said.”
- benchtobedside 7y ago
  Neither of these two quotes in the article provide a compelling counterpoint to the outsized impact that Prop C would have had on Stripe's business.
  - deleted 7y ago
    [deleted]
  - x0x0 7y ago
    Yeah. Salesforce probably has north of 50% margins. Eating 1% is annoying but livable. A Square or Stripe type business probably has under 5% margins, making this a tax of 10 to 20 percent of profit.
    - gamblor956 7y ago
      Unless things changed over the summer, Square is not profitable, so this is just an additional major expense that makes profitability harder to achieve.
- 7y ago
wmf 7y ago
It seems like raising prices from 2.9% to 2.93% would cover the tax. (I assume they don't want to go to 3% because that looks like a huge jump.) The real question in my mind is why does Stripe bother to exist if they're barely breaking even.
- tempsy 7y ago
  Low margin, high volume.
- deleted 7y ago
  [deleted]
- AdieuToLogic 7y ago
  > The real question in my mind is why does Stripe bother to exist if they're barely breaking even. Stripe has a valuation of $35,000,000,000 USD[0]. The real question I have is how anyone thinks Stripe is "barely breaking even." 0 - https://www.forbes.com/sites/donnafuscaldo/2019/09/19/stripe-now-has-a-pre-money-valuation-of-35-billion/#191a737862e6 https://www.forbes.com/sites/donnafuscaldo/2019/09/19/stripe...
  - senko 7y ago
    Valuation and profit or loss are not connected (see Uber).
    - thomasjudge 7y ago
      ...WeWork, Theranos,...
tempsy 7y ago
It doesn’t miss that...it actually says it wasn’t a big factor (though take with grain of salt). I can buy that they needed more space, and that it would be cheaper there then elsewhere.
dmode 7y ago
I believe it is gross receipts within the City. The impact is surely negligible
- nrp 7y ago
  San Francisco has probably the most complex payroll and gross receipts tax system of any city in the world. The calculator you're supposed to use is: https://sftreasurer.org/sites/default/files/2019-08/BT_2019%20GRT%20COMPUTATION%20WORKSHEET_07.01.19.pdf https://sftreasurer.org/sites/default/files/2019-08/BT_2019%... The item specifically relevant to Stripe is that it's categorized as a Financial Services rather than Information company. Financial Services companies have to allocate gross receipts based 50% on their payroll location and 50% based on their sales location. So while their portion of sales in San Francisco is negligible, most of their payroll is there.
  - dmode 7y ago
    I have a hard time believing most of their payroll is here. Strip is fairly disturbed and probably has huge ops and customer service teams in low cost locations. Their payroll footprint in the city, while significant, will not be burdensome when it comes to gross receipts
    - nrp 7y ago
      Payroll tax is based on apportionment of payroll expense, rather than headcount. It also includes stock based compensation. I'd guess most of their payroll expense is in San Francisco.
  - nothrabannosir 7y ago
    This is significant information, because there’s a whole conversation upthread assuming the gross receipts tax applies to their full business.
AdieuToLogic 7y ago
> Payment processing is an ultra low margin business, no way they can compete while paying ~1% of revenues to the city. Stripe charges %2.9 + $0.30 per transaction. That is not an "ultra low margin" by any means in the CC processing domain. Actually, that is a massive markup when compared to other ISO's and VAR's. Depending on the Merchant's processor and their volume, significance, and sophistication, their Discount Rate[0] is often well less than the %2.9 Stripe demands. The fact that Stripe also tacks on another $0.30 USD on top of the top-end Discount Rate for their transaction fee is insane (see here[1] and here[2] for some context and these don't even account for fee negotiations). And to suggest "no way can they compete while paying ..." is to ignore Stripe has a valuation at/near $35,000,000,000 USD[3]. 0 - https://www.creditcards.com/credit-card-news/glossary/term-discount-rate.php https://www.creditcards.com/credit-card-news/glossary/term-d... 1 - https://usa.visa.com/dam/VCOM/download/merchants/visa-usa-interchange-reimbursement-fees.pdf https://usa.visa.com/dam/VCOM/download/merchants/visa-usa-in... 2 - https://www.mastercard.us/content/dam/mccom/en-us/documents/merchant-interchange-rates-2019-2020.pdf https://www.mastercard.us/content/dam/mccom/en-us/documents/... 3 - https://techcrunch.com/2019/09/19/stripe-is-raising-another-250m-at-a-35b-pre-money-valuation/ https://techcrunch.com/2019/09/19/stripe-is-raising-another-...
- thr0waway43234 7y ago
  Regarding their pricing to low-touch customers, like anyone just signing up on the website, yes, it's a very good margin for a payment processor. But the trick is that nobody processing a million a day + is going to pay that. They'll negotiate, hard, or change providers. I suspect most of them are in more traditional cost plus contracts: 5c-50c take per transaction, even though the entire bank processing fee is counted in revenue. In those cases, the local tax would put SF companies at a major disadvantage vs Adyen, which doesn't pay a tax on revenues. Given that Stripe is already not a major player for those very large companies, 1% of revenues on merchants that have high average transaction sizes means they might as well not show up to the negotiating table, as their break even point will be more expensive than other's best offer.
- dehrmann 7y ago
  > Stripe charges %2.9 + $0.30 per transaction. That is not an "ultra low margin" by any means in the CC processing domain. That's revenue, not margin.
darawk 7y ago
Lol, what? San Francisco taxes revenue of businesses that are there? I had to google it to check because I couldn't believe a city would actually do something that stupid. But it seems its real: https://sftreasurer.org/business/taxes-fees/gross-receipts-tax-gr https://sftreasurer.org/business/taxes-fees/gross-receipts-t... This is just....staggeringly stupid. It just penalizes low margin businesses, for no reason. How can anyone possibly think this is a good idea?
- abalone 7y ago
  > This is just....staggeringly stupid. It just penalizes low margin businesses, for no reason. How can anyone possibly think this is a good idea? You might want to ask sf.citi, the SF tech industry lobbying group who came up with it in 2012. Here's a video of Jack Dorsey campaigning for the gross receipts tax as CEO of Square.[1] The argument then, of course, was that we shouldn't tax early stage pre-revenue tech companies based on their payroll because it increases their burn rate. Better to wait until they generate revenue and tax that. Help support the growth of new companies so they can bring in more tax revenue in the long run. Or so the argument went. Now that they're making money and it's time to pay up, of course, they've changed their tune. Suddenly they've discovered that the system they lobbied for and got is "unfair" and they still shouldn't pay taxes. [1] https://www.sfgate.com/business/article/SF-Citi-video-plugs-in-tech-Prop-E-3930793.php https://www.sfgate.com/business/article/SF-Citi-video-plugs-...
  - ergocoder 7y ago
    It's unfair because Square pays more tax than Saleforce. Not because they have to pay tax. It would be great next time if you can mention the whole reason around. unfairness. Here's the tweet: https://twitter.com/jack/status/1053312151136362496 https://twitter.com/jack/status/1053312151136362496 Do you think that's fair?
    - NetToolKit 7y ago
      I haven't researched this issue much, but I think it's fair to expect that the CEO of Square could have anticipated this becoming an issue if Square succeeded. abalone's comment that "they've changed their tune. ... and they still shouldn't pay taxes" could simply be hyperbolic, depending on how charitable people are in their interpretation (e.g. "shouldn't pay [the full amount of] taxes"). I think the main thrust of abalone's comment stands: the CEO of Square pushed for a tax that many think is absurd (e.g. darawk), and now that Square has grown and the tax is unfavorable for them, Square wants to change the tax that it seems to have lobbied for (and presumably thought was fair back then) -- that makes Square seem opportunistic [and not having the community's best interest in mind when the CEO lobbied for the tax]. At least, I think that is abalone's implication.
pentae 7y ago
Exactly, 1% is half or possibly all of their margin. They would have been crazy NOT to go.
product50 7y ago
Literally Stripe wrote a blog post on this on how Prop C will really hurt companies like them which have high gross receipts but very thin margin. But at the time, half the people accused them of being intolerant to homelessness and the city that supports them. Marc Benioff, the sponsor of Prop C, can do this given he has a SaaS company with high margins and the fact that he has political ambitions. This is an expected outcome given that. What this means is more cars on streets as South San Francisco has pretty bad infra and driving/taking shuttles is the only way to get to the new Stripe office.
hn_throwaway_99 7y ago
For a payment processor, does "gross receipts" include the full amount of the purchase, or just the amount that Stripe takes (e.g. 2.9% + $.30). If it's the full amount of a purchase, not only is that insane, but it really feels like double dipping, as the seller would have to pay the tax on their receipts as well.

by cjlars 7y ago

Articles misses that this is in response to SF's gross receipts tax. Payment processing is an ultra low margin business, no way they can compete while paying ~1% of revenues to the city.

MuffinFlavored 7y ago

Payment processing rates in China are ____ Payment processing rates in USA are ___ Can somebody help me double check something? I don’t know the answers to those questions I feel like I read WeChat processes payments at 0.1% while Stripe/PayPal are still around 2%

lukeschlather 7y ago
I have a credit card that gives me 1.5% cash back on every transaction. I'm reading that Visa typically charges 2.3% to merchants, and Stripe charges 2.9%, ignoring per-transaction fees. So Stripe itself probably gets around 0.6% of each transaction, and at least on average 1% of each transaction goes to cardholder bonuses, and the card issuer gets around 1.3%. Of course both Stripe and the issuer have some fraud prevention built-in, I don't know how much that amounts to (and how much more effective China is at combating fraud, though it's possible WeChat simply doesn't accept as much liability as American payment processors do.)
- aeternum 7y ago
  Card not present transactions (the type primarily used by Stripe) are charged at a significantly higher rate due to the higher likelihood of fraud. To use square as an example, card present is 2.6% whereas card not present is 3.5%.
- AdieuToLogic 7y ago
  Your conflating fees charged to Merchants (by processors) and rewards offered to Card Holders (by issuers). While often the same bank performs, or is a partial owner involved in, both processing and issuing, the percentages you quote are largely disjoint. > I'm reading that Visa typically charges 2.3% to merchants ... The Discount Rate[0] a Merchant pays varies significantly based on the line-of-business, charge-backs, processing contract, and a bunch of other things. > ... at least on average 1% of each transaction goes to cardholder bonuses ... Again, issuer costs have no bearing on Merchant fees nor the profitability of processors. 0 - https://www.creditcards.com/credit-card-news/glossary/term-discount-rate.php https://www.creditcards.com/credit-card-news/glossary/term-d...
  - nitrogen 7y ago
    Again, issuer costs have no bearing on Merchant fees nor the profitability of processors. If this is true, then where does the cash back come from if not as a cut of the merchant fees?
    - AdieuToLogic 7y ago
      > > Again, issuer costs have no bearing on Merchant fees nor the profitability of processors. > If this is true, then where does the cash back come from if not as a cut of the merchant fees? Interest rates + membership fees charged by issuers to Card Holders.
      - rstupek 7y ago
        I don't think that is correct. Merchants are charged different rates based on the cash back rates of a given card. Merchants have to eat most of that cash back being given to the card holders.
  - ceejayoz 7y ago
    Interchange fees are higher on premium (rewards) cards. The merchant may contractually pay a fixed percentage that accounts for the expected mix of cards, but those rewards absolutely come from merchant fees.
- rwmurrayVT 7y ago
  There are entire organized crime rings and many, many individuals that specialize in merchant account fraud. In the early 2010's people were creating stripe accounts and processing up to $100,000 fraudulently. I'm not sure who ate that, but it surely had an impact on their bottom line. I had screenshots from Alphabay of over $5,000,000 in fraudulent charges on merchant accounts. If Stripe only makes 1% of transaction cost and has to eat the fraud then they'd have to charge $500,000,000 to just make up what was posted in a single "mastermind group". That is crazy...
- MuffinFlavored 7y ago
  From a quick Google, I think the difference is that WeChat is bank-to-bank, therefore the rates are 0.1%
- dehrmann 7y ago
  > I have a credit card that gives me 1.5% cash back on every transaction Some of this is paid for by people carrying balances. The bet is that cash back will attract enough people to get and use the card that, in aggregate, interest will make up for cash back.

ergocoder 7y ago

Also, the tax oddly targets Stripe and Square. People don't talk about this very much. But it seems extremely unfair that Stripe/Square pay way more tax than Saleforce in terms of ratio to their revenues. (I don't recall the numbers. Anyone?) Jack Dorsey tried to raise this point multiple times. But people just kept screaming that he didn't care about homeless :S

natalyarostova 7y ago
Neither does San Francisco. They just pretend they do.
henrikschroder 7y ago
> But people just kept screaming that he didn't care about homeless JFC, it's not because of a lack of money that SF has a problem with homeless people, and it's not that more money would make the problem magically go away.
- taurath 7y ago
  I’ll be honest though. I’m not sure new housing can actually work to lower prices, with all the incentives for real estate locked towards ever increasing prices. Maybe over decades, while losing the entire feel of the city?
  - paulie_a 7y ago
    They'll be plenty house as talented people continue to flee. Meanwhile juniors flock. If a CEO of a sizable Corp can't get by without a roommate something is wrong. I certainly wouldn't work there for less than a half plus million a year. Shit weather and fog I'd rather work in North Dakota.
    - dmode 7y ago
      This is surely exaggerated right ? I know CEOs of large startups who live in mansions in Woodside, Berkeley, Mill Valley etc

deleted 7y ago

[deleted]

deleted 7y ago

[deleted]

dickeytk 7y ago

What are you talking about? It specifically talks about it and even provides 2 quotes with contradicting points of view: “Alex Tourk, spokesman for sf.citi, a tech business group, said San Francisco needs to consider changes to its business taxes. The city is currently reviewing the tax system, which brings in a total of $1 billion annually. But those taxes could climb higher under the revised system. “Unfortunately, Stripe choosing to leave town is not an anomaly,” he said. “The membership of sf.citi would prefer a more holistic strategy per the mayor’s suggestion that we work together as a collective business community to fix the gross receipts tax once and for all and establish a fair and equitable tax system that we can all rely on.” Chris Thornberg, founder of Beacon Economics, said businesses leaving San Francisco has more to do with real estate costs and high wages than taxes. “Taxes don’t have a lot of impact on business decisions. It’s something that has been exaggerated for years,” Thornberg said. Stripe is staying in the Bay Area, so its departure isn’t a blow to the region, he said.”

benchtobedside 7y ago
Neither of these two quotes in the article provide a compelling counterpoint to the outsized impact that Prop C would have had on Stripe's business.
- deleted 7y ago
  [deleted]
- x0x0 7y ago
  Yeah. Salesforce probably has north of 50% margins. Eating 1% is annoying but livable. A Square or Stripe type business probably has under 5% margins, making this a tax of 10 to 20 percent of profit.
  - gamblor956 7y ago
    Unless things changed over the summer, Square is not profitable, so this is just an additional major expense that makes profitability harder to achieve.
7y ago

wmf 7y ago

It seems like raising prices from 2.9% to 2.93% would cover the tax. (I assume they don't want to go to 3% because that looks like a huge jump.) The real question in my mind is why does Stripe bother to exist if they're barely breaking even.

tempsy 7y ago
Low margin, high volume.
deleted 7y ago
[deleted]
AdieuToLogic 7y ago
> The real question in my mind is why does Stripe bother to exist if they're barely breaking even. Stripe has a valuation of $35,000,000,000 USD[0]. The real question I have is how anyone thinks Stripe is "barely breaking even." 0 - https://www.forbes.com/sites/donnafuscaldo/2019/09/19/stripe-now-has-a-pre-money-valuation-of-35-billion/#191a737862e6 https://www.forbes.com/sites/donnafuscaldo/2019/09/19/stripe...
- senko 7y ago
  Valuation and profit or loss are not connected (see Uber).
  - thomasjudge 7y ago
    ...WeWork, Theranos,...

tempsy 7y ago

It doesn’t miss that...it actually says it wasn’t a big factor (though take with grain of salt). I can buy that they needed more space, and that it would be cheaper there then elsewhere.

dmode 7y ago

I believe it is gross receipts within the City. The impact is surely negligible

nrp 7y ago
San Francisco has probably the most complex payroll and gross receipts tax system of any city in the world. The calculator you're supposed to use is: https://sftreasurer.org/sites/default/files/2019-08/BT_2019%20GRT%20COMPUTATION%20WORKSHEET_07.01.19.pdf https://sftreasurer.org/sites/default/files/2019-08/BT_2019%... The item specifically relevant to Stripe is that it's categorized as a Financial Services rather than Information company. Financial Services companies have to allocate gross receipts based 50% on their payroll location and 50% based on their sales location. So while their portion of sales in San Francisco is negligible, most of their payroll is there.
- dmode 7y ago
  I have a hard time believing most of their payroll is here. Strip is fairly disturbed and probably has huge ops and customer service teams in low cost locations. Their payroll footprint in the city, while significant, will not be burdensome when it comes to gross receipts
  - nrp 7y ago
    Payroll tax is based on apportionment of payroll expense, rather than headcount. It also includes stock based compensation. I'd guess most of their payroll expense is in San Francisco.
- nothrabannosir 7y ago
  This is significant information, because there’s a whole conversation upthread assuming the gross receipts tax applies to their full business.

AdieuToLogic 7y ago

> Payment processing is an ultra low margin business, no way they can compete while paying ~1% of revenues to the city. Stripe charges %2.9 + $0.30 per transaction. That is not an "ultra low margin" by any means in the CC processing domain. Actually, that is a massive markup when compared to other ISO's and VAR's. Depending on the Merchant's processor and their volume, significance, and sophistication, their Discount Rate[0] is often well less than the %2.9 Stripe demands. The fact that Stripe also tacks on another $0.30 USD on top of the top-end Discount Rate for their transaction fee is insane (see here[1] and here[2] for some context and these don't even account for fee negotiations). And to suggest "no way can they compete while paying ..." is to ignore Stripe has a valuation at/near $35,000,000,000 USD[3]. 0 - https://www.creditcards.com/credit-card-news/glossary/term-discount-rate.php https://www.creditcards.com/credit-card-news/glossary/term-d... 1 - https://usa.visa.com/dam/VCOM/download/merchants/visa-usa-interchange-reimbursement-fees.pdf https://usa.visa.com/dam/VCOM/download/merchants/visa-usa-in... 2 - https://www.mastercard.us/content/dam/mccom/en-us/documents/merchant-interchange-rates-2019-2020.pdf https://www.mastercard.us/content/dam/mccom/en-us/documents/... 3 - https://techcrunch.com/2019/09/19/stripe-is-raising-another-250m-at-a-35b-pre-money-valuation/ https://techcrunch.com/2019/09/19/stripe-is-raising-another-...

thr0waway43234 7y ago
Regarding their pricing to low-touch customers, like anyone just signing up on the website, yes, it's a very good margin for a payment processor. But the trick is that nobody processing a million a day + is going to pay that. They'll negotiate, hard, or change providers. I suspect most of them are in more traditional cost plus contracts: 5c-50c take per transaction, even though the entire bank processing fee is counted in revenue. In those cases, the local tax would put SF companies at a major disadvantage vs Adyen, which doesn't pay a tax on revenues. Given that Stripe is already not a major player for those very large companies, 1% of revenues on merchants that have high average transaction sizes means they might as well not show up to the negotiating table, as their break even point will be more expensive than other's best offer.
dehrmann 7y ago
> Stripe charges %2.9 + $0.30 per transaction. That is not an "ultra low margin" by any means in the CC processing domain. That's revenue, not margin.

darawk 7y ago

Lol, what? San Francisco taxes revenue of businesses that are there? I had to google it to check because I couldn't believe a city would actually do something that stupid. But it seems its real: https://sftreasurer.org/business/taxes-fees/gross-receipts-tax-gr https://sftreasurer.org/business/taxes-fees/gross-receipts-t... This is just....staggeringly stupid. It just penalizes low margin businesses, for no reason. How can anyone possibly think this is a good idea?

abalone 7y ago
> This is just....staggeringly stupid. It just penalizes low margin businesses, for no reason. How can anyone possibly think this is a good idea? You might want to ask sf.citi, the SF tech industry lobbying group who came up with it in 2012. Here's a video of Jack Dorsey campaigning for the gross receipts tax as CEO of Square.[1] The argument then, of course, was that we shouldn't tax early stage pre-revenue tech companies based on their payroll because it increases their burn rate. Better to wait until they generate revenue and tax that. Help support the growth of new companies so they can bring in more tax revenue in the long run. Or so the argument went. Now that they're making money and it's time to pay up, of course, they've changed their tune. Suddenly they've discovered that the system they lobbied for and got is "unfair" and they still shouldn't pay taxes. [1] https://www.sfgate.com/business/article/SF-Citi-video-plugs-in-tech-Prop-E-3930793.php https://www.sfgate.com/business/article/SF-Citi-video-plugs-...
- ergocoder 7y ago
  It's unfair because Square pays more tax than Saleforce. Not because they have to pay tax. It would be great next time if you can mention the whole reason around. unfairness. Here's the tweet: https://twitter.com/jack/status/1053312151136362496 https://twitter.com/jack/status/1053312151136362496 Do you think that's fair?
  - NetToolKit 7y ago
    I haven't researched this issue much, but I think it's fair to expect that the CEO of Square could have anticipated this becoming an issue if Square succeeded. abalone's comment that "they've changed their tune. ... and they still shouldn't pay taxes" could simply be hyperbolic, depending on how charitable people are in their interpretation (e.g. "shouldn't pay [the full amount of] taxes"). I think the main thrust of abalone's comment stands: the CEO of Square pushed for a tax that many think is absurd (e.g. darawk), and now that Square has grown and the tax is unfavorable for them, Square wants to change the tax that it seems to have lobbied for (and presumably thought was fair back then) -- that makes Square seem opportunistic [and not having the community's best interest in mind when the CEO lobbied for the tax]. At least, I think that is abalone's implication.

pentae 7y ago

Exactly, 1% is half or possibly all of their margin. They would have been crazy NOT to go.

product50 7y ago

Literally Stripe wrote a blog post on this on how Prop C will really hurt companies like them which have high gross receipts but very thin margin. But at the time, half the people accused them of being intolerant to homelessness and the city that supports them. Marc Benioff, the sponsor of Prop C, can do this given he has a SaaS company with high margins and the fact that he has political ambitions. This is an expected outcome given that. What this means is more cars on streets as South San Francisco has pretty bad infra and driving/taking shuttles is the only way to get to the new Stripe office.

hn_throwaway_99 7y ago

For a payment processor, does "gross receipts" include the full amount of the purchase, or just the amount that Stripe takes (e.g. 2.9% + $.30). If it's the full amount of a purchase, not only is that insane, but it really feels like double dipping, as the seller would have to pay the tax on their receipts as well.